Aluminum Corp of China (Chinalco), China's largest aluminum producer, is eyeing rare earth mines in Guangxi Zhuang autonomous region to bolster reserves, sources familiar with the matter said on Wednesday.

Chinalco has initiated discussions with the Guangxi State-owned Assets Supervision and Administration Commission (SASAC) to develop rare earth mines with local miners, and also participate in the processing projects, said the source on condition of anonymity.

Chinalco Vice-President Lu Yongqing confirmed that the company was in talks with the Guangxi SASAC, but said nothing has been finalized yet.

China supplies more than 95 percent of the global output of rare earth oxides and sits on half of the reserves in the world. Apart from Guangxi, most of the rare earth output is from the Inner Mongolia autonomous region as well as Jiangxi, Guangdong, Hunan, Fujian and Sichuan provinces.

The government has indicated that it wants big companies to spearhead the consolidation of the nation's rare earth sector, which has been largely undervalued by over-exploitation and poor management.

Rare earths, comprise of 17 elements, which are used in many high-tech sectors like wind turbines, hybrid cars, missiles and mobile phones.

Industry sources said Inner Mongolia-based Baotou Steel Rare Earth High-Tech Co has led rare earth consolidation in northern China, while Jiangxi Copper Corp and Ganzhou Rare Earth Mineral Industry Co will take up the mantle in Sichuan and Jiangxi.

But the consolidation pace has not been progressing as expected since the 123 rare earth mines are spread across the nation.

Guangxi is a region with rich rare earth resources that are yet to be developed.

Analysts said Chinaclo's move is in line with the government's plan to keep most of the rare earth mining under the ambit of State-owned enterprises. Earlier media reports suggested that the government had identified several large State-owned miners for the rare earth exploration business.

"Rare earth accounts for a small proportion of Chinaclo's business. The move to gain rare earth mines is a strategic plan and in line with the government thinking," said Liu Minda, an analyst with Huatai Securities.

The Ministry of Land and Resources said in March that production of rare earth would be capped at 89,200 tons in 2010, up 8.36 percent from 2009.